Lead Counsel Sued for Not Suing Andersen

Sheesh, talk about one giant pain in the you-know-what for Bernstein Litowitz and Kirby, McInerney & Squire. Do tell you say? O.K., so you remember the Bennett Funding Group securities class action, right? Well, don't worry if you don't, because it was filed back when Dolly the Sheep was born, and wrapped up around the time the last Pyrenean Ibex was found dead. So why do we care now you ask? Well, because in 2002 three law firms (Chikovsky and Shapiro, P.A., Shapiro & Shapiro, and DiJoseph & Portegello -- good luck finding their websites) brought a lawsuit against the two firms, which were lead counsel in the Bennett case, because their clients were “upset over the law firms' failure to name Arthur Andersen & Co” as a defendant in the case (of course, one naturally assumes they first thanked lead counsel for the $166.5 million in settlements achieved in the case).

But you know, it really seems like Judge John E. Sprizzo (S.D.N.Y.) is getting fed up with these malcontents (the Shapiro gang that is), as he issued an injunction that prohibits them from “sending further notices to Class members without prior Court approval,” and from “filing and/or proceeding with any legal malpractice claim against Class counsel relating to losses incurred in Bennett Funding securities in courts other than in this Court.” When a jurisdictional issue arose, Judge Sprizzo “ordered the parties to submit simultaneous briefs on the issue of jurisdiction by November 7, 2005.” What happened? According to Judge Sprizzo, not only did Plaintiffs “fail to offer a submission,” but their “local counsel, Arnold E. DiJoseph, III, refused to appear at this Conference, opting instead to send a wholly unprofessional and wildly accusatory letter directly to the Court of Appeals.” Smart thinking DiJoseph. Brilliant.

Anyway, after finding that SDNY does have jurisdiction, Judge Sprizzo threw the case out for good, commenting that “having declined to opt out of the class action, plaintiffs have reaped the benefits of the work done by the law firms and have either failed to object to the fees requested by the law firms or have failed to convince this Court that the fees were not warranted. Despite this, plaintiffs now seek to drag the law firms into court essentially to recover from the law firms for losses incurred in the Ponzi scheme that formed the basis for the underlying action. As Judge Sporkin so cogently noted in Thomas v. Albright, to unleash such suits upon class counsel in fora far and wide would severely undermine the class action system and would discourage able counsel from taking such cases to the detriment of those for whom a class action suit may be the only vehicle for achieving justice.”

You can read Achtman v. Bernstein, Litowitz, Berger & Grossmann, LLP and Kirby, McInerney & Squire, LLP, issued January 5, 2006, at 2005 U.S. Dist. LEXIS 38375.

Nugget: “Plaintiffs were free to opt out of the class action or simply to pursue their own claims against Andersen, as others did. Having chosen not to do so or even to object to the law firms' counsel fees, they should not be permitted to attack the quality of the law firms' representation on that ground in a separate action.